CITY INTERVIEW: Plain speaker Robert Hiscox ready to end an era

Robert Hiscox, the wise patriarch of the Lloyd’s of London insurance market, has always broken the mould.

He started his career in the business founded by his father, Ralph, back in 1965 and took control five years later – at the tender age of 27 – on the death of Hiscox senior.

The fusty insurance establishment had palpitations at the thought of such a stripling being in charge.

Top of his game: 'Everyone thinks I am dropping off the edge of a cliff, but I will still be employed,' says Robert Hiscox

But more than 40 years later, Hiscox
is still there, his verve undimmed by the prospect of his imminent
retirement as chairman of the company that bears his name.

He transformed the business from an underwriting firm to an international operation.

It floated on the stock exchange in
1993, and now has a market value of nearly £1.9billion. Despite the
financial crisis, the shares have risen more than 30 per cent in the
past year. Hiscox has a retail arm, and offers cover ranging from home
insurance to kidnapping.

In an era when many business leaders
speak in meaningless jargon and are chaperoned relentlessly by their PR
minders, Hiscox simply says what he thinks.

‘That is a hindrance if you want to
win medals and honours or to be in politics, but I don’t want one just
for keeping my nose clean for years.’

Hiscox is a veteran of the Lloyd’s
debacle in the late 1980s and early 1990s, and played a major role in
saving the historic insurance market from ruination, serving as deputy
chairman during some of its darkest days, between 1993-95.

At that time, members, known as
Names, staked their entire personal wealth down to the last cufflink or
earring. Some were turned into paupers.

‘Not all the people becoming members
of Lloyd’s were rich. Mini-members could join by showing the security of
a one bedroom flat in Fulham.’

‘I used to sit on the fence outside my house with my head in my hands and think this is all at risk.

‘My wife was a member of Lloyd’s too, as was my mother in law and my mother, so I would have had it.’

After undergoing years of reform, Lloyd’s is now, he says, a very well disciplined business.

In September it reported profits of
£1.5billion, its best half year result for five years, thanks to a
respite from natural disasters.

That came to a brutal end with
Hurricane Sandy. ‘We are at that ghastly period betwixt the event and
itself being able to count the cost. We have said around $20billion
insured cost to the industry, but we really don’t know. It takes a long
time with floods for people to realise the extent of the damage,’ Hiscox
says, adding that he expects rates to stiffen.

He adds: ‘Just as we thought we
were on course for a fat year, it struck. It is a message that Mother
Nature remains as capricious as ever.’

‘At Hiscox we will have a slightly less handsome year than we hoped and of course we still have the winter to come.

‘It is forecast to be the worst
winter since 1962-63 and if it is, there will be a lot of problems here
in Britain, just from burst pipes.

‘Water damage is the number one enemy of household insurance. It is worse than burglary, or fire which is relatively rare.’

Having lived through the Lloyd’s disaster, Hiscox has trenchant views on the banks.

‘They made banking a deeply
unpleasant experience for the customer. It is your money but they make
you feel deeply privileged for letting you have it there, and they talk
down to you.’

‘They stopped loving the customer and
started chasing shareholder value. Once you stop loving the customer,
you start abusing them and the banks have done that.

‘The PPI policies they have been
selling are disgusting. On the investment banking side they are
absolutely devoted to gouging the customers. I have had investment
bankers coming to me all my career trying to persuade me to commit
corporate suicide.

‘They will sit in front of you and
try to persuade you to do a big deal but they are just thinking of their
big fee, they don’t give a stuff about you.’

He is equally outspoken on the
subject of tax, which has become controversial after it emerged a string
of US giants including Starbucks, Google and Amazon pay little or no
corporation tax in the UK.

‘As a man whose company is based in Bermuda I cannot moralise,’ he says.

‘This moral repugnance George Osborne
talks about is so wrong. Tax in this country is so complicated that you
have to have an adviser, and it is so high that you obviously ask the
adviser to mitigate it. If you had a simple, flat tax, people would not
try to avoid it.‘

‘When they brought in the 50 per cent rate, I said it would result in me paying less.

‘I am not morally repugnant, but why
should I pay half of my income to the incompetent people who run the
country with such obvious waste?’‘If they had a flat tax on companies
and individuals, they would make much more money for the exchequer and
they could get rid of a lot of Revenue staff.

‘One in 10 graduates is becoming an
accountant. They would be redundant. I hate to say it about accountants
but they are not helping the economy of Britain one bit because they are
either helping people save tax or working for the regulators.

‘They are bright people and they could be more constructively employed.’

Warming to the theme, he continues:
‘We moved to Bermuda because 70 per cent of our income came from overseas so I
did not see why we should funnel it through the UK and Gordon Brown’s
greedy hands. Also, we moved because of the good regulatory regime in
Bermuda and proximity to the US.’

‘I am in favour of strong regulation,
because I saw such dishonesty and venality in Lloyd’s in the 1980s, and
deeply incompetent underwriting in the 1990s. But at the moment
regulation is strangling financial services in the UK.’

His concern is that regulators do not
properly understand the insurance industry, and believes a measure of
self-regulation would help it work better.

‘The regulation in Lloyd’s is
excellent as it is a mutual so there is a sense of community interest.
That shows it can be done if the general insurance industry understands
that the misbehaviour of any part of it hurts the whole industry.’

Although he is stepping down as
chairman next year, ‘while he is still on top of his game’, Hiscox, who
has five sons and a clutch of grandchildren, has no intention of
actually retiring, or of piping down.

‘I am stepping down from chairman,
but I will still be employed. Everyone thinks I am dropping off the edge
of a cliff, but I will enjoy the business without the tyranny of the
diary and I can give advice from my experience if it is wanted.’

The change will leave him more time
to travel and for art, which he loves; Frank Auerbach is the artist for
whom he has the greatest affinity.

The company insures art for
customers, but also built a fine collection, while Hiscox himself has
sat for artist Boo Ritson, who covers her subjects with paint, rather
than the canvas. He has his own private collection in his Wiltshire
home.

Hiscox describes his long and
eventful career as ‘bloody good fun,’ and says he has succeeded because
he likes employing people who are ‘much brighter than me.’

It will be the end of an era when he
relinquishes the chair, but Hiscox will no doubt continue making the
current crop of bosses look colourless by comparison.